TE Connectivity Ltd. Net Income jumped on 52.4% and EBITDA Margin increased slightly on 1.0 pp from 20.4% to 21.4%
10/31/2018 • About TE Connectivity Ltd. (
$TEL) • By InTwits
TE Connectivity Ltd. reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- TE Connectivity Ltd. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.6%. At the same time it's a lot of higher than industry average of 3.6%.
- CAPEX is quite volatile: $305m in 2018, $111m in 2017, $118m in 2016, $85m in 2015, $103m in 2014
- The company has highly profitable business model: ROIC is 18.4%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
TE Connectivity Ltd.'s Revenue jumped on 14.8%. Revenue growth showed slowdown in FY18Q4 - it was 8.5% YoY. During the last 5 years Revenue growth bottomed in FY2016 at -7.2% and was accelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin surged on 15.7 pp from 20.9% to 36.5% in 2018.
Gross Margin showed almost no change in FY2018. During FY2014-FY2018 Gross Margin topped in FY2017 at 34.3%. SG&A as a % of Revenue decreased slightly on 1.3 pp from 12.7% to 11.4% in FY2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018. During FY2014-FY2018 SBC as a % of Revenue topped in FY2017 at 0.78%.
Net Income margin increased on 4.5 pp from 13.8% to 18.3% in FY2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 6.7% in FY2018. The company's CAPEX/Revenue increased slightly on 1.8 pp from 4.9% in FY2015 to 6.7% in FY2018. It's average CAPEX/Revenue for the last three years was 5.9%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2015 at 4.9% and was growing since that time.
Accounts receivable as a % of Revenue decreased slightly on 0.67 pp from 17.5% to 16.9% in FY2018. Inventories as a % of Revenue showed almost no change at 13.3% in FY2018. Accounts payable as a % of Revenue decreased slightly on 0.59 pp from 17.3% to 16.7% in FY2018.
TE Connectivity Ltd. has spent
$153m on M&A in FY2018 which accounts for 1.1% of revenue.
Return on investment
The company operates at high and attractive ROE (24.9%) while ROIC is a bit lower (18.4%). ROIC increased on 2.2 pp from 16.2% to 18.4% in FY2018. ROE increased on 6.5 pp from 18.5% to 24.9% in FY2018. During the last 5 years ROIC bottomed in FY2015 at 15.1% and was growing since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.1x and Debt / EBITDA is 1.3x. Net Debt / EBITDA dropped on 0.2x from 1.3x to 1.1x in FY2018. Debt decreased on 7.9% while cash dropped on 30.4%.
TE Connectivity Ltd. has good short term financial stability: Interest coverage ratio (ICR) is 21.8x. TE Connectivity Ltd. has short term refinancing risk: cash is only 88.1% of short term debt.
Average interest expence charged on company's debt was 2.7% in FY2018.
Valuation and dividends
TE Connectivity Ltd.'s trades at EV/EBITDA 10.4x and P/E 10.9x.
The company paid 22.9% of Net Income as dividends in FY2018. Dividends grew on average at 5.8% per annum in the last 5 years).
Management team
Terrence R Curtin is a TE Connectivity Ltd.'s CEO. Terrence R Curtin is a founder and has spent 2 years with the company. CEO total compensation was
$10,237,011 in FY2018 which included
$1,136,539 salary. TE Connectivity Ltd.'s CFO is Heath A Mitts. Heath A Mitts has 2 years tenure at the company.
Insider ownership is 0.22%. Insider ownership didn't change in 2018.
The company has 80,000 employees. The number of employees increased on 2.6%. Average revenue per employee in FY2018 was
$174,850 and it surged on 11.9%.
Financial and operational results
FY ended 09/28/2018
TE Connectivity Ltd. ($TEL) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 11,973 | 12,233 | 11,352 | 12,185 | 13,988 | 14.8% |
| Gross Profit | 3,972 | 4,087 | 3,827 | 4,183 | 4,745 | 13.4% |
| SG&A | 1,534 | 1,504 | 1,396 | 1,543 | 1,594 | 3.3% |
| EBITDA | 2,356 | 2,365 | 2,368 | 2,487 | 2,998 | 20.5% |
| EBIT | 1,805 | 1,749 | 1,808 | 1,876 | 2,331 | 24.3% |
| Interest expence | 127 | 136 | 127 | 130 | 107 | -17.7% |
| Tax | 146 | 337 | -826 | 180 | -344 | -291.1% |
| Net Income | 1,781 | 2,420 | 2,009 | 1,683 | 2,565 | 52.4% |
| Stock Based Compensation | 77 | 89 | 87 | 95 | 95 | 0.0% |
Balance Sheet
|
|---|
| Cash | 2,457 | 3,329 | 647 | 1,218 | 848 | -30.4% |
| Accounts Receivable | 2,057 | 2,120 | 2,046 | 2,138 | 2,361 | 10.4% |
| Inventory | 1,509 | 1,615 | 1,596 | 1,647 | 1,857 | 12.8% |
| Accounts Payable | 1,230 | 1,143 | 1,090 | 1,387 | 1,548 | 11.6% |
| Short Term Debt | 577 | 498 | 331 | 710 | 963 | 35.6% |
| Long Term Debt | 3,281 | 3,386 | 3,739 | 3,634 | 3,037 | -16.4% |
Cash flow
|
|---|
| Capex | 635 | 600 | 603 | 679 | 935 | 37.7% |
| Dividends | 443 | 502 | 509 | 546 | 588 | 7.7% |
| Acquisitions | 522 | 1,725 | 1,336 | 250 | 153 | -38.8% |
Ratios
|
|---|
| Revenue growth | 5.1% | 2.2% | -7.2% | 7.3% | 14.8% | |
| EBITDA growth | 22.6% | 0.4% | 0.1% | 5.0% | 20.5% | |
|
|---|
| Gross Margin | 33.2% | 33.4% | 33.7% | 34.3% | 33.9% | -0.4% |
| EBITDA Margin | 19.7% | 19.3% | 20.9% | 20.4% | 21.4% | 1.0% |
| EBIT Margin | 15.1% | 14.3% | 15.9% | 15.4% | 16.7% | 1.3% |
| SG&A, % of revenue | 12.8% | 12.3% | 12.3% | 12.7% | 11.4% | -1.3% |
| SBC, % of revenue | 0.6% | 0.7% | 0.8% | 0.8% | 0.7% | -0.1% |
| Net Income Margin | 14.9% | 19.8% | 17.7% | 13.8% | 18.3% | 4.5% |
| CAPEX, % of revenue | 5.3% | 4.9% | 5.3% | 5.6% | 6.7% | 1.1% |
|
|---|
| ROIC | 17.3% | 15.1% | 15.9% | 16.2% | 18.4% | 2.2% |
| ROE | 20.5% | 26.0% | 22.2% | 18.5% | 24.9% | 6.5% |
| Net Debt/EBITDA | 0.6x | 0.2x | 1.4x | 1.3x | 1.1x | -0.2x |
| Interest expence / Average debt | 3.3% | 3.5% | 3.2% | 3.1% | 2.7% | -0.4% |
People
|
|---|
| Insider ownership | 0.2% | 0.2% | 0.2% | 0.2% | 0.2% | 0.0% |
| Employees | 83,000 | 72,000 | 75,000 | 78,000 | 80,000 | 2.6% |
| Revenue/Employee, th. $ | 144 | 170 | 151 | 156 | 175 | 11.9% |
TE Connectivity Ltd. ($TEL) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 3,336 | 3,562 | 3,764 | 3,509 | | 8.9% | 10.4% | 11.8% | 8.5% |
| EBITDA | 748 | 800 | 731 | 741 | | 14.2% | 26.4% | 4.3% | 13.8% |
| Net Income | -40 | 490 | 454 | 1,661 | | -109.8% | 21.0% | 4.4% | 282.7% |
Balance Sheet
|
|---|
| Cash | 704 | 559 | 770 | 848 | | 5.9% | -27.7% | 2.0% | -30.4% |
| Short Term Debt | 688 | 675 | 714 | 963 | | -34.6% | -23.2% | -18.7% | 35.6% |
| Long Term Debt | 3,317 | 3,335 | 3,294 | 3,037 | | 11.5% | 8.5% | 5.8% | -16.4% |
Ratios
|
|---|
| Gross Margin | 34.9% | 34.0% | 32.3% | 33.7% | | 0.1% | -0.4% | -1.5% | 0.7% |
| EBITDA Margin | 22.4% | 22.5% | 19.4% | 21.1% | | 1.0% | 2.8% | -1.4% | 1.0% |
| Net Income Margin | -1.2% | 13.8% | 12.1% | 47.3% | | -14.6% | 1.2% | -0.9% | 33.9% |
Peers in Electronic Manufacturing Servi
Below you can find TE Connectivity Ltd. benchmarking vs. other companies in Electronic Manufacturing Servi industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| RF Industries, Ltd. ($RFIL) | | 41.9% | -7.8% | -24.0% | 118.4% |
| Alpine 4 Technologies Ltd ($ALPP) | | | 35,893.8% | 5.8% | 71.5% |
| Kemet Corporation ($KEM) | | -1.3% | -10.7% | 3.1% | 58.4% |
| SMTC Corporation ($SMTX) | | -3.5% | -23.9% | -17.1% | 55.2% |
| Deswell Industries, Inc. ($DSWL) | | -7.0% | 17.1% | -0.1% | 36.3% |
| |
|---|
| Median (27 companies) | | 2.8% | 1.7% | 1.9% | 7.1% |
|---|
| TE Connectivity Ltd. ($TEL) | | 2.2% | -7.2% | 7.3% | 14.8% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Neonode Inc. ($NEON) | 68.2% | 66.0% | 86.9% | 77.1% | 89.2% |
| Andrea Electronics Corp ($ANDR) | 83.8% | 99.1% | 88.5% | 96.2% | 70.4% |
| Data I/O Corporation ($DAIO) | 53.9% | 52.4% | 55.0% | 58.9% | 59.4% |
| IPG Photonics Corporation ($IPGP) | 54.1% | 54.6% | 54.9% | 56.6% | 54.8% |
| CTS Corporation ($CTS) | 32.2% | 33.2% | 35.4% | 33.2% | 35.1% |
| |
|---|
| Median (27 companies) | 14.5% | 14.8% | 16.7% | 13.8% | 12.1% |
|---|
| TE Connectivity Ltd. ($TEL) | 33.2% | 33.4% | 33.7% | 34.3% | 33.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| IPG Photonics Corporation ($IPGP) | 41.5% | 42.4% | 41.8% | 44.7% | 40.9% |
| CTS Corporation ($CTS) | 14.7% | 9.0% | 20.7% | 14.0% | 17.8% |
| Methode Electronics, Inc. ($MEI) | 12.6% | 15.4% | 16.5% | 16.5% | 16.1% |
| RF Industries, Ltd. ($RFIL) | 12.4% | 6.7% | -12.1% | 3.1% | 15.9% |
| Kemet Corporation ($KEM) | 3.8% | 7.7% | 9.7% | 9.7% | 13.6% |
| |
|---|
| Median (27 companies) | 4.4% | 5.2% | 4.8% | 4.5% | 4.7% |
|---|
| TE Connectivity Ltd. ($TEL) | 19.7% | 19.3% | 20.9% | 20.4% | 21.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Maxwell Technologies, Inc. ($MXWL) | 3.7% | 2.5% | 4.9% | 6.6% | 11.3% |
| IPG Photonics Corporation ($IPGP) | 11.5% | 7.8% | 12.6% | 9.0% | 11.0% |
| eMagin Corporation ($EMAN) | 5.8% | 4.7% | 6.7% | 6.2% | 8.8% |
| CTS Corporation ($CTS) | 3.2% | 2.5% | 5.2% | 4.3% | 6.1% |
| Kemet Corporation ($KEM) | 3.9% | 2.7% | 2.8% | 3.4% | 5.4% |
| |
|---|
| Median (27 companies) | 2.5% | 2.4% | 2.8% | 2.7% | 2.4% |
|---|
| TE Connectivity Ltd. ($TEL) | 5.3% | 4.9% | 5.3% | 5.6% | 6.7% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| RF Industries, Ltd. ($RFIL) | 8.5% | 4.6% | -18.7% | 0.9% | 29.2% |
| IPG Photonics Corporation ($IPGP) | 27.0% | 27.8% | 25.1% | 29.9% | 22.9% |
| Methode Electronics, Inc. ($MEI) | 19.7% | 26.1% | 22.7% | 20.8% | 19.2% |
| Kemet Corporation ($KEM) | -2.8% | 3.8% | 6.2% | 6.9% | 16.9% |
| CTS Corporation ($CTS) | 11.4% | 5.3% | 18.1% | 9.8% | 14.8% |
| |
|---|
| Median (29 companies) | 4.4% | 4.9% | 6.2% | 4.2% | 6.4% |
|---|
| TE Connectivity Ltd. ($TEL) | 17.3% | 15.1% | 15.9% | 16.2% | 18.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpine 4 Technologies Ltd ($ALPP) | | | | 34.1x | 65.7x |
| SigmaTron International, Inc. ($SGMA) | 2.7x | 4.1x | 2.4x | 3.4x | 16.0x |
| SMTC Corporation ($SMTX) | 3.5x | 1.8x | 1.0x | | 11.3x |
| IEC Electronics Corp. ($IEC) | 7.1x | 14.0x | 2.0x | 5.6x | 4.9x |
| Key Tronic Corporation ($KTCC) | 0.2x | 3.4x | 2.6x | 2.5x | 3.9x |
| |
|---|
| Median (22 companies) | -0.5x | -0.9x | -0.0x | -0.1x | -0.2x |
|---|
| TE Connectivity Ltd. ($TEL) | 0.6x | 0.2x | 1.4x | 1.3x | 1.1x |
